Clarida’s Confessions:
The Dollar continued its rampant appreciation this morning following the testimony of the Federal Reserve’s Vice Chairman, Richard Clarida. In the first major speech of his appointment, the American economist sided with further US monetary policy tightening. The Vice Chair did not appear concerned by equity market evolutions in the previous weeks despite the aggressive admonitions and deriding comments by President Trump. The Chair and Vice Chair of the Fed appear to be wholly aligned, paving the way towards less accommodative monetary policy that promises to afford the Dollar greater value. The Vice Chair also followed his premier Jay Powell in distancing the Federal Reserve from politics and the White House maintaining that the Fed’s only “job is to sustain what is a very healthy and robust economy”. US Gross Domestic Product data released this afternoon for the third quarter of 2018 surprised to the upside. The recording came in at an annualised 3.5% versus consensus expectations of 3.3%. The reading did, however, still underwhelm the previous figure of 4.2% growth. The data is also used to produce a GDP deflator, a proxy or alternative statistic for the more popular measure of inflation, the Consumer Price Index. This figure surprised to the downside, underwhelming market expectations by a whole 0.4%, causing a sell off in the Dollar throughout the afternoon. Given the principal and superior importance of inflation to monetary instruments and interest rates, this statistic overwhelmed the market effect of the more popular growth measure. Cable recovered from lows of 1.2775 to comfortably trade within the 1.28s at market close. The Euro was also able to recover pivotal ground above 1.14, surpassing important resistance.
Discussion and Analysis by Charles Porter
Next level EURUSD has managed a relatively smooth ascent to its current levels, around 1.18. That is despite significant resistance levels, most notably around 1.17. A large collection of option strike prices gathered around this key level and the price history of the pair shows us its significance. Sustained closes above this level since last […]
A weaker Dollar: Trump vs. Powell The Dollar continued to lose ground yesterday as the truce between Israel and Iran appeared to continue to hold. There has been a noticeable return to focus upon macro and monetary influences in major currency pairs. Yesterday, Fed Chair Jay Powell provided his semi-annual monetary policy report before the […]
Whiplash A highly volatile start to yesterday’s trading session saw a flight to safety in markets. Despite the Dollar having lost much of its appeal as a safe haven lately, there was still an identifiable USD bid prior to and during the European open. We have identified recently how markets have clearly differentiated between general […]